By Steve Kelman

Lessons from the French invasion of Silicon Valley

Source: PRNewswire/SiliconValleyMap.com

I noticed essentially no attention in the media to the visit by French President Francois Hollande to the Silicon Valley during his current U.S. visit. Interestingly, however, there was a fascinating article in the London-based Financial Times on the topic. It turns out there are about 60,000 French citizens living in California, one of the biggest French communities in the world outside France. And many of them are in the Silicon Valley doing startups.

Hollande would like to attract many of them back to France, but before he is able to do so, he needs to understand the reasons given in the article for why they came in the first place. (Hint: it’s not the architecture, and it’s not the food.)

The answer seems to be a mixture of attitudes towards startups in French society and some government policies that try to protect legacy businesses from competition. It is hard to find a landlord willing to rent to a small company, for example. There is much less private cash available to start up new ventures. And nationalism and protectionism hurt too.

The government has tried to shield bookstores by prohibiting Amazon from offering free shipping. It has even tried to protect the existing taxi industry by requiring the likes of Uber to wait 15 minutes before picking up passengers! It has refused to approve takeovers by large foreign companies of successful French small tech companies. (Interestingly, the article did not mention the higher taxes in France compared with the United States as a problem.)

There is a lesson here, both for the United States and for France. For the U.S., it reminds us of our continuing sources of strength in terms of fostering the innovation that is so essential to the ability of an advanced economy to survive in a world of low-wage competition. We have a culture more accepting of risk, institutions that make it easier for new firms to raise capital more easily, and a government that by and large does not try to hinder innovation. As long as we have all this, the United States is likely to continue to be in good shape in the new world in which we need to compete.

For countries such as France, it reminds them that success is not simply a matter of doing the kinds of things to encourage innovation that come easiest to them, such as establishing lavish “science parks” to serve as places where talent can be near other talent or to fund basic research. It goes deeper into a country’s DNA.